1. Marcom Objective Setting and Budgeting
Chapter Six
Marcom Objective Setting and Budgeting

2. Chapter Six Objectives
Understand the process of marcom objective setting and the requirements for good objectives.
Describe the hierarchy-of-effects model and its relevance for setting marcom objectives.
Understand the role of sales as a marcom objective and the logic of vaguely right versus precisely wrong thinking.

3. Chapter Six Objectives
Understand the nature and importance of marcom budgeting.
Explain the relation between a brand’s share of market (SOM) and its share of voice (SOV).
Explain the various rules of thumb, or heuristics, that guide practical budgeting.

4. Setting Marcom Objectives
Goals that the various marcom elements aspire to individually or collectively achieve during a scope of time such as a business quarter or fiscal year.

5. Marcom Objectives
Facilitate the successful introduction of new brands.
Build sales of existing brands by increasing the frequency of use, the variety of use, or the quantity purchased.
Inform the trade and consumers about brand improvements.

6. Marcom Objectives Create brand awareness Enhance a brand’s image
Generate sales leads
Persuade the trade to handle the manufacturer’s brands
Stimulate point-of-purchase sales
Increase customer loyalty

7. Marcom Objectives
Improve corporate relations with special interest groups
Offset bad publicity about a brand or generate good publicity
Counter competitors’ communication efforts
Provide customers with reasons for buying immediately instead of delaying a purchase

8. Setting Marcom Objectives
Expression of management consensus
Guides the budgeting, message, and media aspects of advertising strategy
Provide standards against which results can be measured

9. The Hierarchy of Marcom Effects
The hierarchy of effects metaphor implies that for marketing communications to be successful it must move consumers from one goal to the next goal.

10. The
Hierarchy
Of Effects

11. Advancing Consumers From Unawareness to Awareness
Advertising (mass media or otherwise) is generally the most effective and efficient method for quickly creating brand awareness.
Creating an Expectation

12. Hierarchy of Effects
Encouraging
Trial
Purchases

13. Hierarchy of Effects Forming Beliefs and Attitudes
Reinforcing Beliefs and Attitudes
Accomplishing Brand Loyalty

14. Requirements for Setting Suitable Marcom Objectives
Include a precise statement of who, what, and when
Be quantitative and measurable
Specify the amount of change
Be realistic
Be internally consistent
Be clear and put it in writing

15. Should Marcom Objectives Be Stated in Terms of Sales?
Presales Objectives: communication objectives that attempt to increase the target audience’s brand awareness, enhance their attitudes toward the brand, shift their preferences from the competitors’ brand and so on.
Sales Objectives: means the marcom objective literally is to increase sales by a particular amount.

16. Should Marcom Objectives Be Stated in Terms of Sales?
Traditional View (Thesis)
Sales volume is the consequence of a host of factors in addition to marcom
Effect of marcom efforts is delayed

17. Sales Volume as a Marcom Objective
Heretical View (Antithesis)
Marcom’s purpose is to generate sales
Sales measures are “vaguely right”

18. The Logic of Vaguely Right Vs. Precisely Wrong Thinking
Choice of
Objective
Issue
Measurement
Accuracy
Issue
Versus
Precisely
Wrong

19. An Accountability Perspective (Synthesis)
Chief executives and financial officers are demanding greater accountability from marcom programs.
The measurement of effects of a program should not stop short of measuring the effect on sales.

20. Marcom Budgeting in Theory
The best(optimal) level of any investment is the level that maximizes profits(MR=MC)
Advertisers should continue to increase their advertising investment as long as it is profitable to do so MC
= (Change in total cost)
(Change in quantity)
= TC/Q MR
= (Change in total Revenue)
(Change in quantity)
= TR/Q

21. Sales-to-Advertising Response Function
The relationship between money invested in advertising and the response, or output, of that investment in terms of revenue generated.

22. An Example of a Sales-to-Advertising Response Function

23. Practical Budgeting Methods
Percent-of-Sales Budgeting
Objective-and-Task Method
Competitive Parity Method
(match competitors’ method)
Affordability Method

24. Percentage-of-Sales Budgeting
A company sets a brand’s advertising budget by simply establishing the budget as a fixed percentage of past or anticipated sales volume
Criticized as being illogical
Sales=f(Advertising) (o)
Advertising=f(Sales) (x)

25. Objective-and-Task Method
The most sensible and defendable advertising budgeting method
Specify what role they expect advertising to play for a brand and then set the budget accordingly

26. The Competitive Parity Method
Sets the ad budget by basically following what competitors are doing
SOM- the ratio of one brand’s revenue to total category revenue
SOV-the ratio of a brand’s advertising expenditures to total category advertising expenditures

27. Advertising Spend, SOV, and SOM for Top-10 Wireless Phone Brands

28. Advertising Spend, SOV, and SOM for Top-10 Beer Brands

29. The SOV/SOM Effect and Ad Spending Implications

30. Encoding Variability Hypothesis
Contends that people’s memory for information is enhanced when multiple pathways, or connections are created between the object to be remembered and the information about the object that is to be remembered.

31. Affordability Method
Only the funds that remain after budgeting for everything else are spent on advertising
Only the most unsophisticated and impoverished firms
However, affordability and competitive considerations influence the budgeting decisions of all companies